Insolvency Act 1986, section 425

Provision which may be made by order under s. 423

Part XVI Provisions Against Debt Avoidance (England and Wales only)

(1)Without prejudice to the generality of section 423, an order made under that section with respect to a transaction may (subject as follows)—

(a)require any property transferred as part of the transaction to be vested in any person, either absolutely or for the benefit of all the persons on whose behalf the application for the order is treated as made;

(b)require any property to be so vested if it represents, in any person’s hands, the application either of the proceeds of sale of property so transferred or of the money so transferred;

(c)release or discharge (in whole or in part) any security given by the debtor;

(d)require any person to pay to any other person in respect of benefits received from the debtor such sums as the court may direct;

(e)provide for any surety or guarantor whose obligations to any person were released or discharged (in whole or in part) under the transaction to be under such new or revived obligations as the court thinks appropriate;

(f)provide for security to be provided for the discharge of any obligation imposed by or arising under the order, for such an obligation to be charged on any property and for such security or charge to have the same priority as a security or charge released or discharged (in whole or in part) under the transaction.

(2)An order under section 423 may affect the property of, or impose any obligation on, any person whether or not he is the person with whom the debtor entered into the transaction; but such an order—

(a)shall not prejudice any interest in property which was acquired from a person other than the debtor and was acquired in good faith, for value and without notice of the relevant circumstances, or prejudice any interest deriving from such an interest, and

(b)shall not require a person who received a benefit from the transaction in good faith, for value and without notice of the relevant circumstances to pay any sum unless he was a party to the transaction.

(3)For the purposes of this section the relevant circumstances in relation to a transaction are the circumstances by virtue of which an order under section 423 may be made in respect of the transaction.

(4) In this section “security” means any mortgage, charge, lien or other security.

Definitions used in section 425 2

the debtor

(2) In Schedule 6 “the debtor” means the company or the individual concerned.

Defined in s.386(2) · see it in the full Act
party

(3) In section 72B(1) and this paragraph “party” to an arrangement includes a party to an agreement which—

(a)forms part of the arrangement,

(b)provides for the raising of finance as part of the arrangement, or

(c)is necessary for the purposes of implementing the arrangement.

Defined in Sch.2A para.1(3) · see it in the full Act

(4) “Party” to an arrangement includes a party to an agreement which—

(a)forms part of the arrangement,

(b)provides for the raising of finance as part of the arrangement, or

(c)is necessary for the purposes of implementing the arrangement.

Defined in Sch.ZA1 para.19(4) · see it in the full Act

Cases considering section 425 66

El-Husseiny and another v Invest Bank PSC

[2025] UKSC 4 · 19 February 2025Interprets

The section provides a non-exhaustive range of remedies and limited protection for certain good-faith recipients. Its terms do not imply that section 423 applies only where the debtor transfers personally owned property (see paras [48]-[56]). The reference to any property transferred as part of the transaction supports a construction which is not limited to the debtor’s own property (see para [55]). The reference to any property vested in a person supports a construction which is not limited to the debtor’s own property (see para [55]). The limited protection for good-faith purchasers and recipients does not imply that every transaction under section 423 must involve property transferred by the debtor. A volunteer cannot invoke the value-based protection (see paras [48]-[53]; [56]). The protection applies to an interest acquired from someone other than the debtor in good faith, for value and without notice. Its formulation does not imply a universal requirement that the transaction concern property owned by the debtor (see paras [49]-[53]). The protection limits monetary orders against a good-faith recipient who gave value without notice and was not a party to the debtor’s transaction. It does not imply that the transaction must transfer the debtor’s property (see paras [48]-[53]).

Ashleigh Fletcher & Anor v Vibhutiben Desai

[2026] EWHC 728 (Ch) · 27 March 2026Limits

Cited as setting out the types of orders available under section 423. (see para [20]) Interprets a vesting order as capable of benefiting all persons on whose behalf the application is treated as made. It does not support relief exclusively for one victim in an insolvent case. (see paras [20]; [43]-[44]) Cited in distinguishing the authority relied upon by the respondent, concerning protection of an existing Halifax charge in a solvent section 423 case. (see paras [20]; [31]; [44])

Importers Service Corporation & Anor v Mario Aliotta & Ors

[2026] EWHC 533 (Ch) · 9 March 2026Limits

Applies section 425(1)(a) as authorising an order vesting transferred property in the transferor or for the benefit of victims. The court used this remedial power to restore the 2024 share transfers. Confirms the protection given to interests acquired in good faith, for value and without notice. The court also recognised that section 423 may affect innocent recipients, while the remedial consequences depend on the statutory protection and the circumstances of the transfer.

46 more judgments, and what each says about section 425, are in the case-law panel in the full Act.

Amendments and notes

4 notes from legislation.gov.uk

Modifications

  1. C1241S. 425 applied (with modifications) by S.I. 1986/1999, art. 3, Sch. 1 Pt. II
  2. C1242Ss. 423-425 applied (with modifications) (17.2.2009 for certain purposes, otherwise 21.2.2009) by Banking Act 2009 (c. 1), ss. 103, 263(1)(2) (with s. 247); S.I. 2009/296, arts. 2, 3, Sch. para. 3
  3. C1243Ss. 423-425 applied (with modifications) (17.2.2009 for certain purposes, otherwise 21.2.2009) by Banking Act 2009 (c. 1), ss. 145, 263(1)(2) (with s. 247); S.I. 2009/296, arts. 2, 3, Sch. para. 3
  4. C1244S. 425 applied (with modifications) (8.7.2021) by The Payment and Electronic Money Institution Insolvency Regulations 2021 (S.I. 2021/716), regs. 2, 37 (with reg. 5) (as amended (4.1.2024) by S.I. 2023/1399, regs. 1(2), 4, 11)